Standing out: how new firms in emerging markets build reputation

Abstract

While strategy and organizational researchers increasingly recognize that observers' perceptions and beliefs about firms have a substantive effect on firms' access to resources and performance, the processes through which these perceptions form are not well understood. To address this question, we examined how three new firms - Amazon.com, barnesandnoble.com and CDNow - that entered the emerging e-commerce domain in the mid-1990s built their initial reputations in the media. Given the limited theory and empirical evidence about the process of reputation accumulation by new firms in emerging markets, we used the case study method to develop inductively a model that relates the visible external actions of the three firms to the patterns of media coverage they accumulated. Patterns of media coverage are likely to both reflect and affect the process of reputation accumulation, as the media constitute an influential audience of critics, who first form their own perceptions and opinions, thereby reflecting the process of reputation accumulation, and then disseminate these perceptions and opinions to the public, thereby influencing the perceptions and opinions of other stakeholder audiences. Our analysis indicates that the pattern of market actions of new firms influences the pattern of media coverage they receive in terms of levels (visibility), content (strategic character), tenor (favorability) and distinction (esteem).The observed inter-firm differences in these characteristics of received coverage suggest that reputation may be better understood as a composite construct and that firms' reputational assets may vary in their composition. Our study offers an inductively developed process model that relates the market actions of new firms to the accumulation of the different components of their initial reputations in the media.